Finding the right key to growing aggregate demand

Aggregate demand growth amid challenges

According to the General Statistics Office, total domestic consumer demand is reflected in the total retail sales index. In the first 11 months of 2023, total retail sales of goods and consumer service revenue at current prices are estimated to increase by 9.6% over the same period last year (the same period in 2022 increased by 20.2%), if excluding price factors, it increased by 7.0% (the same period in 2022 increased by 16.6%).

Speaking to Lao Dong, Dr. Nguyen Bich Lam - Former General Director of the General Statistics Office - commented: "The increase in total consumer demand through the total retail sales index is only half that of last year, which shows that domestic consumer demand is still weak. Meanwhile, external consumer demand is also weak. The decrease in exports and imports shows the general difficult context in the world , domestic production has not recovered well" - Mr. Lam said.

Regarding public investment disbursement, Dr. Lam said that the growth figures are not large enough. Accordingly, data from the Ministry of Planning and Investment showed that the country's disbursement in 11 months was about VND461,000 billion, reaching 65.1%, higher than the same period (58.33%) and the absolute number was nearly VND123,000 billion higher.

Speaking more about the growth momentum in early 2024, Mr. Lam emphasized the institutional reform efforts of the Government and the Prime Minister. According to him, institutional reform is the growth momentum for the economy but has not been mentioned by the Government in the past.

Dr. Lam believes that if there is a good legal environment and difficulties for production and business activities are removed, the economy will have a good chance of recovery.

New growth drivers

Discussing possible solutions for 2024, Dr. Nguyen Bich Lam said that the bright spot in total demand is that manufacturing enterprises are proactively seeking output, for example, shrimp production and export has developed to more than 100 markets; textile and garment exports, in addition to maintaining traditional markets, have also begun to seek niche markets and new markets in the Middle East.

However, Mr. Lam emphasized that there are still many businesses that are having difficulty finding outlets. Although the Government and the Prime Minister have recently directed the State Bank to provide credit solutions for manufacturing businesses, output is difficult so businesses are hesitant to borrow.

"I think that one of the first factors that can be focused on is to strengthen solutions to promote domestic consumption. In addition to the 2% VAT reduction policy lasting until 2024, I think that there should be more solutions to reduce prices and promote products to increase purchasing power," Dr. Lam analyzed.

Regarding investment, Dr. Lam proposed that in order to speed up the progress of projects, the Government needs to have a solution to separate the construction contractor and the unit responsible for site clearance. According to him, site clearance should be assigned to the localities, and the Provincial People's Committee should direct the speed up of progress. When site clearance is completed, bidding should be organized and contractors should be brought in to implement.

Contributing to the solution, Prof. Dr. To Trung Thanh - Head of Science Management Department, National Economics University, proposed a new growth driver. Accordingly, when the economy is facing problems of declining aggregate demand and the possibility that this year's growth may not reach the Government's target, the digital economy will be one of the important new drivers, contributing to bringing the economy back on track.

According to Mr. Thanh, recently the National Economics University organized the 6th international scientific conference "Contemporary issues in economics, management and business (CIEMB) 2023". Here, one of the notable points of the scientists was to make forecasts and quantify the contribution rate of the digital economy in the economy as well as the potential impact of the digital economy on productivity and competitiveness of the economy.

Mr. Thanh said: "The digital economy not only helps increase investment levels, contributing to increasing total demand, but also has a very profound and long-term impact on the total supply of the economy, helping the economy to grow sustainably."

Source